Once Assessee has filed an appeal by paying pre-deposit amount of 7.5%, their bank account cannot be freeze

We are
sharing with you an important judgment of Hon’ble CESTAT, Mumbai, in the case
of Kala Mines
and Minerals Vs. Commissioner of Customs, Central Excise & Service Tax, Goa
[2015-TIOL-193-CESTAT-MUM]on the
following issue:

Issue:

Whether the Department can freeze the bank account of Assessee when
appeal has already been filed by paying the mandatory pre-deposit amount of 7.5%?

Facts & background:

In the instant
case, an Order was passed by the Ld. Commissioner, Goa confirming Service tax
liability on Kala Mines and Minerals (“the
Appellant”). Being aggrieved by the said Order, the Appellant preferred an
appeal before the Hon’ble CESTAT, Mumbai by making a pre-deposit of 7.5% of the
Service tax demand confirmed in terms of Section 35F of the Central Excise
Act, 1944 (“the Excise Act”).

Despite of such compliance, the
Deputy Director, DGCEI, Goa has written a letter to Appellant’s bankers namely
HDFC, SBI and Corporation Bank to remit the amounts lying balance in the
account of the Appellant in order to credit the same with the Government
exchequer against the dues. Pursuant to the said communication, the banks froze
the accounts and were not allowing the Appellant to operate the accounts for
their day-to-day activities/ functioning.

Being aggrieved,
the Appellant made a plea before the Hon’ble Tribunal.

Held:

On listing of the matter before
the Hon’ble Tribunal on January 19, 2015, the Hon’ble Tribunal held that once
statutorily mandatory deposit of 7.5% has been made, there is no reason for
recovery of any further amount from the Appellant and the action of the Deputy
Director, DGCEI seems to be beyond the scope of law. Hence, there is no need to
freeze the account of the Appellant as long as the appeal is pending before the
CESTAT.

The Central Board of Excise &
Customs vide Circular No. 984/08/2014-CX dated September 16, 2014 clarified
that no coercive measures for the recovery of balance amount i.e., the amount
in excess of 7.5% or 10% deposited in terms of Section 35F of the Excise Act or
Section 129E of the Customs Act, 1962 shall be taken during the pendency of
appeal where the Assessee shows to the Jurisdictional Authorities:

(i) Proof of payment of
stipulated amount as pre-deposit of 7.5% / 10%, subject to a limit of Rs. 10
crores , as the case may be; and

(ii) Copy of appeal memo filed
with the Appellate Authority.

It was further provided that
recovery action, if any, can be initiated only after the disposal of the case
by the Commissioner (Appeals)/ Tribunal in favour of the Department unless the
order of the Tribunal is stayed by the High Court/ Supreme Court.

The recovery, in such cases, would include the interest, at the
specified rate, from the date duty became payable, till the date of payment.

Hope the
information will assist you in your Professional endeavors. In case of any
query/ information, please do not hesitate to write back to us.